Proposed nuclear deal between Iran and six world powers

UNITED NATIONS Iran will meet next week in Geneva with the five permanent U.N. Security Council members and Germany to discuss a proposed deal under which Tehran would suspend parts of its nuclear program in exchange for limited sanctions relief.

Iran denies allegations by Western powers and their allies that it is seeking the capability to produce atomic weapons and insists its nuclear ambitions are limited to the peaceful generation of electricity.

Following are questions and answers about the proposed deal based on comments from government officials, diplomats and nuclear experts. All details are preliminary and subject to change, diplomats say.

WHAT IS THE BACKGROUND?

Iran has been hit with U.S., European Union and U.N. Security Council sanctions for refusing to comply with U.N. resolutions that it halt uranium enrichment and other sensitive nuclear activities that could be used to make weapons.

Iranian oil exports have fallen by about 60 percent in the past two years as the EU stopped purchases and most Asian buyers drastically cut imports because of the sanctions. Iran is now earning only about $100 million a day from oil sales as opposed to $250 million two years ago.

In addition to the loss of oil income, inflation in Iran has risen sharply over the past two years and the value of the country's rial currency has plummeted.

Iranian President Hassan Rouhani was elected in June on a platform of conciliation, saying he wanted to ease Iran's international isolation and end the sanctions. He has also sought to improve relations with Washington.

WHAT ARE THE NEGOTIATIONS?

Britain, China, France, Germany, Russia and the United States have met with the Iranians three times since September, when foreign ministers from the six powers and Iran announced a renewal of negotiations aimed at ending the dispute with Tehran. The negotiations are being coordinated by EU foreign policy chief Catherine Ashton.

Two rounds of negotiations in Geneva in October and November failed to produce a deal, although diplomats involved said they were close to securing an interim agreement at the round of talks last week.

The goal of the talks next Wednesday to Friday in Geneva is to finalize an interim deal to allow time for the powers to negotiate a permanent agreement with Iran that would end the decade-long standoff over Tehran's nuclear ambitions and provide assurances to the six powers that its atomic program would not produce bombs.

WHAT IS IRAN BEING ASKED TO DO?

The latest IAEA report on Iran said Tehran had slowed the expansion of its enrichment program to a virtual halt. Western powers want Iran to go further.

- Convert its existing stocks of about 200 kg (440 pounds) of 20 percent enriched uranium to an oxide form, which would create an extra step for Iran if it wanted to reconvert it back into a form usable in weapons;

- Commit to producing less 3.5 percent enriched uranium by using fewer nuclear centrifuges. That would help reduce the overall amount of enriched uranium that Iran is producing;

- Not allow the Arak research reactor to go into operation. At the most recent meeting in Geneva, France demanded that construction of the Arak reactor, which will be capable of producing weapons-grade plutonium if it goes on line, be halted. Washington has also expressed concerns about Arak, saying they must be addressed. Western diplomats say there is agreement among all six powers about what is expected from Iran in the case of Arak, although they declined to say precisely what their demands were regarding the reactor under construction.

HOW MUCH WOULD SUCH A DEAL SLOW DOWN IRAN'S PROGRAM?

U.S. President Barack Obama said on Thursday the proposed deal would buy additional months in terms of Iran's capacity to break out of the nuclear Non-Proliferation Treaty regime and produce weapons, if it chose to do so.

But Olli Heinonen, a nuclear expert at Harvard University and former chief inspector at the IAEA, questioned Obama's suggestion that the timeline for Iran's ability to produce a nuclear bomb would be pushed back months. With many centrifuges spinning in Iran, a weapons capability would inevitably remain.

Heinonen said the six powers would most likely be buying weeks rather than months. To be effective, a permanent deal would have to reduce significantly the number of operational centrifuges in Iran, Heinonen told Reuters.

WHAT ARE SOME OF THE STICKING POINTS?

Diplomats say that key sticking points are what to do with the Arak reactor - Iran does not want to give it up - and Tehran's insistence that the six powers explicitly recognize its right to enrich uranium. The United States says that while countries may have a right to civilian nuclear energy, no state has an inherent right to have enrichment capabilities.

Iran has said it will not stop enrichment, although it has suggested it would be willing to limit it. It has also said it will not ship its uranium out of the country.

WHAT IS IRAN BEING OFFERED AS INCENTIVES?

There has been much contradictory information presented to the public about the offer being floated to Iran. Based on information provided to Reuters by diplomats and government officials, two of the key points are the following:

- The gradual disbursement in installments of Iranian funds frozen in overseas bank accounts. The maximum amount available for disbursement is around $50 billion, according to Western officials. U.S. Secretary of State John Kerry said in a television interview on Thursday that he offered a "tiny portion" of Iran's frozen funds as a possible initial payment;

Further possible details emerged on Wednesday. One source briefed on the discussions told Reuters that Iran was being offered a chance to sell about $3.5 billion of oil over six months as well as $2 billion to $3 billion of petrochemicals and $1 billion to $2 billion of gold.

At current prices, that would permit Tehran to sell about an additional 200,000 barrels of oil a day, a 20 percent increase in exports. The source said it would also let Tehran import some $7.5 billion of food and medicine, plus $5 billion of other goods currently barred.

Israel's Strategic Affairs and Intelligence Minister Yuval Steinitz said on Wednesday the relief package offered could lower the annual cost of sanctions to Iran by anywhere from $20 billion to $40 billion - out of a total annual cost of $100 billion.

Israeli Prime Minister Benjamin Netanyahu has been lobbying against any agreement at the Geneva talks that would fail to strip Iran of nuclear enrichment capabilities and has urged no let-up in economic sanctions.

Asked about the $20 billion-to-$40 billion estimate, State Department spokeswoman Jen Psaki told reporters, "That number, I can assure you, is inaccurate, exaggerated and not based in reality."

Another Western diplomatic source told Reuters that Steinitz's estimate was "grossly inflated," although he declined to provide details, saying the six powers had agreed to try not to leak information to the media.

A U.S. media report on Thursday cited a former Obama administration official as saying that Iran in the first phase of the deal would receive less than $10 billion in sanctions relief.

(Additional reporting by Fredrik Dahl in Vienna, Justyna Pawlak in Brussels, Lesley Wroughton and Timothy Gardner in Washington and reporters in Jerusalem; Editing by Peter Cooney)

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